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You are considering an investment in 20-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year
You are considering an investment in 20-year bonds issued by Moore Corporation. The bonds have no special covenants. The Wall Street Journal reports that 1-year T-bills are currently earning 0.30 percent. Your broker has determined the following information about economic activity and Moore Corporation bonds: = 0.24% Real risk-free rate Default risk premium Liquidity risk premium = 1.25% = 0.50% Maturity risk premium = 1.05% a. What is the inflation premium? b. What is the fair interest rate on Moore Corporation 20-year bonds? (For all requirements, round your percentage answers to 2 decimal places. (e.g., 32.16)) a. Inflation premium % b. Fair interest rate %
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